Basic tax planning for private equity funds and hedge funds

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The item Basic tax planning for private equity funds and hedge funds represents a specific, individual, material embodiment of a distinct intellectual or artistic creation found in International Bureau of Fiscal Documentation.

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Facts: Generally speaking, a private equity fund is a fund (i.e., an ownership arrangement involving central management and control of a set of assets and liabilities) that: (1) primarily invests in start-up companies and/or distressed companies and sells them once a significant return is obtainable; (2) primarily has investors consisting of wealthy individuals, pension funds, and governments; and (3) is generally not subject to securities regulation by a government body. A group of individuals is planning to set up a private equity fund (PEF), which will have the following investors (where their nature as either a Host Country or foreign person is as defined under Host Country's income tax law): HI, a Host Country wealthy individual; FI, a foreign wealthy individual; HPEN, a Host Country pension fund and tax-exempt entity under Host Country's income tax law; FPEN, a foreign pension fund; and FGOV, a foreign government. PEF will be making investments both in business entities formed and operating in Host Country ("Host Country business entities") and in business entities formed and operating abroad ("foreign business entities"). PEF will fund its investments only with contributed capital and not with any borrowings. "Savvy", an individual who is considered a Host Country person for purposes of Host Country's income tax law, will be making the investment decisions for PEF and will be compensated with a 20 percent "carried interest", i.e., a 20 percent interest in the profits of PEF. The articles explore the setting up of private equity funds and hedge funds in each country

Facts: Generally speaking, a private equity fund is a fund (i.e., an ownership arrangement involving central management and control of a set of assets and liabilities) that: (1) primarily invests in start-up companies and/or distressed companies and sells them once a significant return is obtainable; (2) primarily has investors consisting of wealthy individuals, pension funds, and governments; and (3) is generally not subject to securities regulation by a government body. A group of individuals is planning to set up a private equity fund (PEF), which will have the following investors (where their nature as either a Host Country or foreign person is as defined under Host Country's income tax law): HI, a Host Country wealthy individual; FI, a foreign wealthy individual; HPEN, a Host Country pension fund and tax-exempt entity under Host Country's income tax law; FPEN, a foreign pension fund; and FGOV, a foreign government. PEF will be making investments both in business entities formed and operating in Host Country ("Host Country business entities") and in business entities formed and operating abroad ("foreign business entities"). PEF will fund its investments only with contributed capital and not with any borrowings. "Savvy", an individual who is considered a Host Country person for purposes of Host Country's income tax law, will be making the investment decisions for PEF and will be compensated with a 20 percent "carried interest", i.e., a 20 percent interest in the profits of PEF. The articles explore the setting up of private equity funds and hedge funds in each country